Table of Contents
Key Points
- ArcelorMittal South Africa will cease Longs steel operations by January 2025, affecting 3,500 jobs, driven by market losses, rising imports, and high production costs.
- The restructuring impacts Newcastle and Vereeniging plants, with coke-making scaled back. Consultations under labour law are set to begin.
- Despite government talks, ArcelorMittal cited weak demand and unsustainable operations, aligning with global steel industry downturns and capacity cuts.
ArcelorMittal South Africa, a Gauteng-based steelmaker partly linked to South African businesswoman Noluthando Gosa, has announced plans to wind down its longs steel division. This decision, citing unsustainable operations and insufficient policy interventions, is expected to impact approximately 3,500 jobs.
The announcement, made in a business update on Monday, follows years of prolonged losses driven by weak steel markets, escalating energy and logistics costs, and a surge in low-cost steel imports. The closure marks a significant restructuring effort, expected to result in a 76 percent decline in earnings per share for 2024. Steel production in the Longs unit is slated to cease by late January 2025, with a full closure anticipated by the end of the first quarter of 2025.
ArcelorMittal SA restructures, employees affected
CEO Kobus Verster emphasized that the restructuring is critical to securing the company’s long-term survival. “As a company, we are disappointed that our efforts over the past year did not yield a sustainable solution. The issues raised could have firmly addressed the structural problems within the South African steel industry,” Verster said. Despite these efforts, the closure is projected to result in a 76 percent drop in earnings per share for 2024.
The restructuring will heavily impact operations at Newcastle Works, Vereeniging Works, and ArcelorMittal Rail and Structures. While coke-making operations at Newcastle will continue on a smaller scale, the November 2023 decision to place the Longs Steel Business under care and maintenance failed to deliver a viable path forward.
This strategic adjustment aligns with global steel industry challenges. Rising imports, particularly from China, have placed immense pressure on domestic producers. The World Steel Association reported a 1.4 percent decline in global steel production in 2023 and a 2.3 percent drop in South Africa, where imports have surged by 50 percent since 2018 and exports have fallen by 40 percent.
Verster thanked employees for their commitment and promised a responsible wind-down process. The company is also restructuring its remaining operations and is in discussions to realign its R1 billion ($54 million) working capital facility to support the transition.
Steel industry woes hit ArcelorMittal
The closure underscores the company’s broader response to an evolving market. ArcelorMittal South Africa, with a production capacity of 7 million metric tonnes annually, has faced increasing pressure from rising costs and unsustainable competition from low-cost imports.
Despite these challenges, the company remains committed to strong governance and ethical practices, supported by directors like Noluthando Gosa, who holds a 6.15 percent stake and a diverse investment portfolio.
The financial impact of the closure is significant, with a projected R2.7 billion ($144.5 million) impairment charge. This underscores the depth of the steel market downturn, which is expected to lead to a substantial loss for the year ending Dec. 31, 2024. However, the company’s strategic adjustments aim to position it for resilience amid ongoing industry volatility.
